By Gertrude Chavez-Dreyfuss
NEW YORK- US Treasury yields rose marginally on the long end of the curve Friday after producer prices data came in firmer than expected, which overall did not alter expectations that the Federal Reserve was likely to cut interest rates at its September meeting.
The benchmark 10-year yield rose 1 basis point (bp) to 4.202 percent On the week, however, it fell 7.3 bps, on track for its largest weekly fall in about a month.
The US 30-year yield dipped 1.4 bps to 4.418 percent .
On the short end of the curve, the two-year yield slid 2.6 bps to 4.481 percent It hit a more than four-month low of 4.47 percent , before sliding. On the week, it was down 11.8 bps.
US yields initially climbed after Friday’s data showed the producer price index (PPI) rose 0.2 percent last month after being unchanged in May. Economists polled by Reuters had forecast the PPI edging up 0.1 percent.
Details on the components in the producer prices report that go into the calculation of the key inflation measures tracked by the Fed were mostly favorable. That along with the weaker numbers on consumer prices led economists to expect personal consumption expenditures (PCE) inflation rose slightly in June.
“The PPI is a little mixed, but it’s more encouraging than it appears on the surface. There was some knee-jerk selloff reaction at first and maybe some algorithms were programmed to trade based on the miss versus consensus,” said Will Compernolle, macro strategist, at FHN Financial in New York.
“A closer look at the details and it is not as concerning, that’s why yields have backed off.
This shouldn’t change anyone’s call for a September rate cut,” he added.
A separate report showed that the University of Michigan’s preliminary reading on the overall index of consumer sentiment fell to 66.0 this month, compared with a final reading of 68.2 in June. Economists polled by Reuters had forecast a preliminary reading of 68.5.
